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Daily Mail & General Trust continues to sell off assets

The combination of asset stripping and cost-cutting is not expected to be enough to prevent the company’s pre-tax profits from falling.

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anonymous

2015-11-17T13:07:43+0000

Source: Bloomberg

Daily Mail & General Trust will announce its full-year results on 25 November, and traders are expecting sales to have increased up to £1.836 billion from last year’s £1.811 billion. At the same time the company’s EPS is due to edge higher from £0,557 up to £0.566. This, however, will not prevent its full-year pre-tax profits from dropping down to £255.54 million, a 4.29% drop from last year’s figures.

As with so many companies with exposure in the print media arena, this has been another year of cost-cutting and asset stripping. The most recent sale DMGT is overseeing is the disposal of its 38.7% stake in Local World Holdings Ltd to Trinity Mirror for a proposed fee of £220 million.

DMGT’s Mail online still maintains its status as the most visited newspaper website as it continues hold the New York Times challenge at bay. Not all of its papers have been as able to translate online readership numbers into financial viable operations. The latest news that The Sun newspaper will backtrack on its two-year venture to protect its online content behind a paywall shows how difficult this balancing act can be.

So far 2015 has proven to be a successful one for Zoopla the online property website as its shares are currently up 20% year to date, and DMGT still retain a 32% stake in the £1 billion company.

Institutional analysts’ expectations for DMGT appear somewhat mixed with seven buys and seven holds of the 16 firms following the company. The average twelve-month price target for the company is 873p, offering a healthy 19.7% premium from the current share price for the firm.

The rally seen throughout the first half of 2015 has come undone in a big way, with DMGT shares now trading 26% lower than the July peak of £9.89. Price action throughout October was largely rangebound, with the price rotating between £7.77 and £7.27. However, the push higher earlier this month is now in danger of looking like a fake-out, with the price attempting to break below £7.27. A close below £7.27 would point towards a move back to £7.00, which has major bearish repercussions if broken given that it represents the neckline of a long-term double top.

While £7.27 is important, the real level to watch is at £7.00, which could either spark a resurgence or if broken could lead to yet another strong move lower towards £6.00 support. For this chart to start looking bullish once more, the price would have to turn higher above £7.00 and move through £7.89 once more. This would subsequently look towards £8.39 as the next resistance level.

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CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please consider our Risk Disclosure Notice and ensure that you fully understand the risks involved.